Social enterprises: Vehicles for poverty reduction and inclusive growth

Date: November 30, 2014

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One out of four Filipinos continue to live below the poverty line. The Philippines will not be able to achieve by 2015 its commitment to cut in half those who are living on USD1.25/day or the threshold of absolute poverty.

Such bleak picture from the Philippine government’s own assessment of the country’s development performance is in sharp contrast to the glowing figures of economic growth over the past 6 years. If we add the glowing figures about the increase in assets of the richest Filipinos, one could easily make the conclusion that our country’s economic growth has not been inclusive.

The Philippines is not the only country that is not going to reach its development target of cutting in half their population living below the poverty line. But despite this, the UN High Level Panel of Eminent Persons that was commissioned to study and recommend the world’s post-2015 development goals has made a call for new global partnerships to transform economies, eliminate poverty and achieve gender equality by 2030.

It is in this context that social entrepreneurship is being proposed and explored as a strategy by the First Social Enterprise Advocacy and Leveraging Conference in Asia (SEAL-Asia).

Social entrepreneurship is all about innovative and sustainable solutions to social problems. And in the context of poverty and inequality, social enterprises with the poor as primary stakeholders or SEPPS have emerged as innovative responses to these problems.

These social enterprises engage the poor not only as workers, suppliers and clients but also as partners in their development. At their best and over time, the poor are enabled to become pro-active stakeholders in value chains and economic subsectors; co-owners, managers and decision makers of their own social enterprises; as well as empowered citizens in their communities and society at large.

SEPPS in the Philippines include social mission-driven microfinance institutions like the Center for Agriculture and Rural Development Mutually Reinforcing Institutions (CARD MRI); social cooperatives and their federations like the Omaganhan Farmers Agrarian Reform Cooperative and the National Federation of Cooperatives of Persons with Disability; fair trade organizations serving small farmers like Bote Central and Alter Trade Foundation Inc; trading development organizations serving marginalized producers like Pilipinas Ecofiber Corporation and Rural Reconstruction Trade; and new generation social enterprises like Human Nature and Hapinoy.

External challenges

A survey involving a sample of 32 SEPPS in the Philippines, conducted as part of a multi-country study by ISEA and Oxfam to be shared during SEAL-Asia, shows great potential for this sector to play a key role in addressing poverty and inequality in the next decade. The combined reach of these 32 SEPPS alone reached 2.5 million poor. If we assume that each poor family reached had 2 members, this figure represents about 30% of the estimated number of poor families in 2012.

The same study cited the many external challenges faced by SEPPS: extreme weather disturbances; government policies negatively affecting social enterprises; inaccessible or inappropriate government programs; corruption in government regulatory bodies; changing market environments and trade liberalization; inadequacy of programs supporting social enterprise development; and industry and market practices negatively affecting social enterprises.

These challenges are the main drivers why SEPPS and their support institutions in the Philippines have come together to set up two major platforms. One is the Reconstruction Initiative through Social Enterprise (RISE) to make social entrepreneurship a major strategy for building back better in Yolanda affected provinces. The other is the Poverty Reduction through Social Entrepreneurship (PRESENT) Coalition, which is pushing for the enactment of a PRESENT law.

An important recommendation emanating from the Oxfam-ISEA study is informative: “…government and business institutions need to be willing to change the policies and practices that have not worked in favor of the poor, and undertake strategic innovations to support the scaling up of SEPPS.”

A strategic innovation toward this direction is the passage and implementation of the PRESENT bill being championed by Sen. Bam Aquino and Congressmen Teddy Baguilat/Cresente Paez in both houses of Congress.